IB paves way for West Seti Project

” Commitment on all demands of CWE “

KATHMANDU, Dec 22

The Investment Board (IB) has urged the CWE Investment Corporation of the China Three Gorges Corporation to come without any reservations for construction of the reservoir based West Seti Hydropower Project (750 MW) assuring to address all the issues raised by the Chinese company.

Writing a letter to CWE, IB has expressed commitment on resolving the issues of resettlement of the displaced, land acquisition, rate for Power Purchase Agreement (PPA) for a reservoir based project, return and construction of transmission line. IB had earlier taken written commitment from Ministry of Land Reforms and Management, Energy Ministry and Finance Ministry that are directly related to the project. “We have expressed commitment to address all the issues raised by it. It is now up to CWE to move the project forward,” Chief Executive Officer (CEO) of IB Radhesh Pant said. He stated that CWE will not face any problem in developing the project as all the ministries are positive about the issues raised by the Chinese company. The estimated cost of the project is over US$ 2 billion.

There was a dialogue with CWE in Kathmandu about moving the project forward in the first week of October. CWE had raised the issues of resettlement of the displaced, land acquisition, PPA rate, return and construction of transmission line at that time, and also demanded a written work plan from the government. The schedule for start of the project and its completion has not been prepared as these issues have not been addressed yet. The government has yet to prepare policy for resettlement of the locals who will be affected by the project. The Nepal Electricity Authority (NEA) has just started to work on the master plan for transmission line. The government itself is uncertain in lack of policies for reservoir based project though there are policies for return and PPA for run of the river projects. Formation of the joint company has been delayed while the working scheduled mentioned in the agreement signed by IB and CWE in August has also been affected due to IB’s inability to address these issues.

The Memorandum of Understanding (MOU) signed by IB and CWE last year states that Nepal will do the works for infrastructure development, resettlement and land acquisition. CWE, on the other hand, has already submitted financial and technical reports to IB and has been saying that these issues have to be addressed soon to complete the project within the scheduled time. Though the project is scheduled to be completed by the end of 2020, the project looks set to be delayed due to uncertainty about construction of the necessary infrastructure. IB has even proposed to reduce the installed capacity of the project stating that NEA is not in a position to do PPA as it is a big and reservoir based project. The financial and technical reports prepared by CWE, however, state that the project will not be financially attractive if its installed capacity is reduced, and it has proposed to keep it a 750 MW project.

The cost of resettlement and land acquisition has not been determined though the preliminary study had put the cost of constructing transmission line at over US$ 400 million. The estimated financial analysis of CWE states that the rate of PPA should be 5.40 cents during the rainy season and 9.50 cents during the dry season for the project to be financially lucrative. CWE has concluded that the annual inflation should be three percent, and loan period 18 years out of which six years have to be grace period for the project to be financially viable. CWE and IB had signed an 18-point MOU at the end of August incorporating the directives of the then parliamentary committee on natural resources and means.

The Snowy Mountain Engineering Corporation (SMEC) of Australia had estimated the cost of the project to be US$ 1.60 billion excluding construction of transmission line around 17 years ago. The project will be built in Public Private Partnership (PPP) model. The locals will be provided up to 10 percent shares in the project that will have 65 percent shares of CWE and 25 percent of Nepal government, according to the MOU. The project will be constructed in Doti, Dadeldhura and Bajhang districts of the far west region.